Depreciation for Second hand machinery purchased

[Ramanathan Seshan]

Dear Experts,

Hope this message finds you well.

I am seeking clarification regarding the charge of depreciation in the context of a transaction between Company A and Company B. Here’s the scenario:

Company A purchases machinery from Company B and it has been using it for three years. As per the management policy of the company A a similar asset has a useful life of 5 years.

With reference to the above, I would like to understand the following:

a) Should we now account for the depreciation for 2 years only as per the IT depreciation rate?

b) What can be other possible way to harvest tax if we want to keep account for depreciation for 5 years under IT Act?

Thanks in advance

Best Regards,

S Ram

AI Summary

Machinery Depreciation: Unlocking Tax Optimization Through Strategic Asset Valuation and Accounting Techniques Under Income Tax Act A company sought advice on depreciation for second-hand machinery purchased from another company. The key discussion centered on calculating depreciation under the Income Tax Act, considering the asset's current usage, written down value, and potential tax optimization strategies. Experts recommended continuing depreciation based on the current written down value and exploring block asset methods or accelerated depreciation options to maximize tax benefits.